Electric Deregulation Promises Remain Unfulfilled

AUSTIN, Texas–(BUSINESS WIRE)–Texans under electric deregulation have consistently paid more for electricity than Texans living in areas that remain outside deregulation, according to a new report released for the 10-year anniversary of retail competition.

Commissioned by the Texas Coalition for Affordable Power (“TCAP”), a nonprofit coalition of 163 municipalities and other political subdivisions, the report tells the story of retail electric deregulation in Texas from the beginning. It was released digitally on the TCAP website (http://historyofderegulation.tcaptx.com/) and includes recent pricing data and in-depth articles focusing on energy policy. It updates an earlier report from 2009.

TCAP board president Jay Doegey says the report shows there’s more work to be done before deregulation can be declared a success. Deregulation of the state’s retail electricity markets began 10 years ago, this month. Under the law, retail electric providers in many parts of the state can compete for customers.

“Although we’ve made some progress, serious concerns remain,” said Doegey. “Electricity prices and complaints have recently decreased from record high levels experienced earlier in the deregulation process, but problems remain. Neither are these recent price declines sufficient to offset the billions of dollars in excess costs to consumers. All this points to a market that is deregulated, but still not fully competitive. Texans deserve meaningful reform.”

Among the report’s key findings:

Texans in deregulated areas of the state have consistently paid higher average annual electricity prices than Texans outside deregulation. This added expense has cost a typical customer under deregulation more than $3,000 since the beginning of retail competition.

Electricity prices above the national average have cost Texans more than $11 billion during the 10-year history of retail competition. Only recently has the trend of above-the-national-average prices in Texas changed.

The number of electric providers has increased under the deregulation law — but so has the complexity of electric contracts. Complaints from electricity customers have been much greater during deregulation, as compared to complaints filed annually prior to deregulation.

Texas had the highest generation reserve margins in the nation prior to the implementation of the deregulation law. Texas now has among the lowest. This has led to serious reliability challenges for the state’s power grid.

There have been two statewide rolling blackouts in four years under deregulation, and at least nine reliability emergencies last year alone. By contrast, the state’s grid operator ordered statewide rolling blackouts only once in 30-plus years before deregulation.

Some generators have recommended market changes designed specifically to increase their profit margins. Many of these proposals abandon competitive principles, and instead rely upon artificial price supports and regulatory intervention to engineer higher prices. But generators offer no guarantee that new supplies will be added to stay ahead of the demand for electricity.

Although the Texas Legislature adopted a helpful reform in 2011, potential abuse in the wholesale power market remains a concern.

Deregulated Electricity in Texasis based on months of research, including a review of journalistic accounts, regulatory documents, academic studies and data from the United States Energy Information Administration.

“Affordable energy saves money for Texans — both as ratepayers and taxpayers,” said TCAP Executive Director Randy Moravec. “Affordable electricity also supports economic development for our communities and a better life for our citizens. For the sake of home consumers, businesses and local governments — it is important that this market work. That’s why reforms calling for greater market transparency and the prevention of abusive pricing are so important.”

Unlike the sponsors of other reports about the state’s deregulated power market, TCAP derives no profit from selling electricity. Instead, the 163 political subdivisions that comprise TCAP purchase electricity for their own governmental needs. TCAP understands how high-cost power can undermine city budgets, can cause businesses to relocate out of state, and can place heavy burdens on home consumers. TCAP wants what all Texans want: an affordable and reliable supply of power and a vibrant economy.

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